Marshalls profits hit by slowdown in construction sector

Marshalls’ profit fell sharply in the first half of 2024, with demand at its landscaping business subdued amid a broader construction slowdown.

The building materials company said its adjusted operating profit fell 19 per cent to £34 million in the six months ended June.

Turnover fell 13 per cent to £306.1m as its landscape products segment was hit by weaker demand for new-build homes and lower spending on private property renovations.

Higher interest rates and cost-of-living pressures have dampened Britons’ appetite for home improvement and buying over the past two years.

It also remains significantly affected by the UK’s strict planning rules, which make it difficult to build large-scale housing developments.

However, Marshalls chief executive Matt Pullen said he was “cautiously optimistic” about a rebound in end markets during the second half of 2024, depending on a “progressive improvement in the macroeconomic environment”.

As a result, the Yorkshire-based company believes its full-year profits and net debt will be “broadly in line” with its previous forecasts.

The Bank of England recently cut the UK’s base rate by 0.25 percentage points to 5 percent, its first reduction in more than four years, after the UK’s inflation rate hit its 2 percent target.

Many lenders, including NatWest, Virgin Money and Leeds Building Society, responded by cutting their mortgage rates for home buyers.

The Marshalls benefited greatly during the lockdown period, when low borrowing costs and lockdown restrictions prompted Britons with extra savings to spend more money on property renovations.

Trading was further boosted by a stamp duty cut, increased working from home and demand for more spacious homes.

Mark Crouch, market analyst at eToro, said Marshalls is currently “facing a precarious set of circumstances – falling revenues and rising costs – in an industry that is struggling to take off and in desperate need of a boost.”

He added: “To its credit, Marshalls has not sat back and has taken decisive action, cutting staff and reducing shareholder returns in a bid to improve efficiency and reduce the company’s debt.”

Marshalls cut its net debt by 16 per cent year-on-year to £155.8m in the first six months of 2024, while its interim dividend was maintained at 2.6p per share.

Marshalls shares were down 1.2 percent at 336 pence on Monday morning, though they are still up around 31 percent over the past 12 months.